Gone are the days when telecommunications companies were intransigent in Afrika. They were monopolies whose services could only be afforded by spendthrift government officials and the rich citizenry prospering in the private sector.
Now they look across their server farms, telecommunications towers, switchboards and dashboards and all they see are dwindling revenues on voice and text — the sweet spots that heralded them into the market of pricey telecommunications services. Today, the downward curve on these revenues is going south faster than envisioned in the past decade or so. The exponential rise of the Internet and the availability of low-cost mobile devices has sired this tectonic slump.
That leads to one conclusion: There must be intelligent life on the other side.
Winter Is Coming
Death knells have long been rung from the erstwhile days of Miko Rwayitare: the godfather of the telecommunications industry in sub-Saharan Afrika. The man famed for founding Afrika’s first mobile telephone network in the Democratic Republic of Congo (DRC) in 1986.
There were warning signs to telecommunications companies for getting so cozy with the establishment and failing to keep up with rapid advancements in technology. They repugnantly avoided low cap markets and indulged only those it could profiteer from with big margins.
Safaricom Revenue for FY11 to FY15.
It’s said, by the mere act of owning of a telecommunications license back in the day, usually obtained through hand-wringing and intense lobbying of rapacious legislators was profiting enough.
The first wave of disruptive forces came up with the liberalization of the sub-Saharan economies in the 1990s on World Bank’s structural adjustment recommendations. Markets were opened up for private sector competition and telecommunications companies started biting each other, albeit parsimoniously.
The most chilling disruptive force that ever hit telecommunications companies was the rise of the Internet in the mid-1990s. This wasn’t felt until the mid-2000s, arguably because of the growing popularity of social media and the fall in prices of Internet-enabled devices and data prices.
If anything, the markets opened up for more and more telecommunications companies. Most popular is Safaricom’s M-Pesa, started in 2007, and has since ensconced itself in Kenya's economy and has been successfully replicated both locally and abroad.
"The most chilling disruptive force that ever hit telecommunications companies was the rise of the Internet in the mid-1990s."
This phase was closely followed by rapid experimentation and deployment of a myriad M-stuff. Kenya and sub-Saharan Afrika got the moniker from the international press for being not only mobile first but also mobile only having leapfrogged her way from traditional systems straight to an apparent digital tomorrow.
In Sub Saharan Afrika, according to the World Bank, 27 out of 57 telecommunications companies individually own more than 50% of their constituent markets because of selective (and secretive) government support which has birthed pure monopolies and cartels in some extreme cases.
While telecommunications companies are strategically positioned as innovation leaders and venerable cathedrals of communications technology, in large part because they control the large network of communications infrastructure while making high returns from market operations. They are not a monopoly on creativity, innovation, and imagination.
They Are Not Startups
There is a special kind of valiance about men and women in the arena. The ones directly taking on gigantic telecommunications companies in providing alternative services or even, those who are daring to build on top of telecommunications companies existing infrastructure without the fear of getting burned.
Even while there have been cases of idea theft and appropriation, startups have had an advantage of speed and nimbleness.
The public secret is that telecommunications companies have always been wary of their own futures. That’s why even as behemoths, they want to radiate a feeling of running like startups.
They are not.
They are big corporations that happen to control critical communications infrastructure, whose possibilities for being multi-purpose is endless especially with the proliferation of mobile phones and handsets to the remotest of places in the Global South.
Cloudy With A Chance Of Meatballs
If you watched “Cloudy with a chance of meatballs”, an animation adapted from Judi Barret’s children’s book under the same title, where food falls from the sky like rain (or manna) then you already have a lucid imagination of what Cisco predicts will happen by the year 2020. The networking equipment vendor predicts that over 50 billion devices such as, but not limited to, smartphones, cars, fridges, toothbrushes will be connected to the cloud and will constantly be in sync contributing to an already large Internet.
There will, however, be several players reselling these devices and even connecting more to the Internet. As consumer demands grow and as more niches spring up, there is, even more, need for catering for particular consumer needs. There is a need for more and more startups. Vertically inclined startups and telecommunications companies seem prepared to sweep these low hanging fruits.
"They are big corporations that happen to control critical communications infrastructure, whose possibilities for being multi-purpose is endless,"
India serves as a good case study where telecommunications companies are mercilessly disrupting each other. With increased niche based needs, there is a 4G-fueled data revolution hastened by Reliance Jio. Ths company, Reliance Jio, was founded by India’s richest man, Mukesh Ambani, in late 2016. Since then, Ambani has invested close to $22 billion in what he has called the world’s biggest, err, startup!
To paint a picture for clarity. Reliance Jio entered the Indian telecommunications market with low-cost product offerings for all of its Internet users. They gained more than 50 million subscribers across India in little less than 3 months. A first anywhere in the world. It took Airtel, India’s biggest telecommunications company, roughly 12 years to reach the same number of subscribers.
It has remarkably found the secret sauce to providing reliable Internet connections to the majority of the 700 million population who have less discretionary income.
Airtel India’s run-ins with Reliance Jio could putatively be causal of the sudden pronouncement to exit operations in several if not all the 15 Afrikan countries it operates in.
While such a specter is not about to unravel in sub-Saharan Afrika, Airtel’s end is nigh, the importance of this case study is to portray the contagion effect one market can have over another. The quakes by Reliance Jio in India can be subtly felt in sub-Saharan Afrika. Airtel in an effort to put up a spirited fight on its home turf would certainly almost mean rationalizing in other markets - a direction that so far doesn’t seem implausible.
In some parts of Afrika, Orange Africa, continues to assert its position as a market leader. In several markets such as Burkina Faso and Sierra Leone, it has acquired the reins left by Airtel Africa for $900m. There are further talks about Orange acquiring Airtel’s other assets in Chad and Congo Brazzaville. Talks about Airtel exiting Ghana are said to be also on-going.
It has to be noted that Airtel continues to perform fairly well as the first or second runner-up in a large chunk of sub-Saharan Afrika markets it operates in. Its exit or the plan thereof will see the industry incumbents cobbling up more market share. In that way, they will be building even larger and potentially more uncontrollable monoliths.
1. Collaboration Is The New Competition
There has been a conversation about interoperability. The telecommunications companies’ mobile money networks have operated in jealously guarded silos and money transfer across networks both domestically and internationally has been impossible or prohibitively expensive.
Following policy suggestions, and in direct response to banking alliances such as this recent one in Kenya, sending money across networks is seeing the light of day. Telcos in Tanzania have for example created an alliance called Taifamoja.com to transfer money across networks. In Kenya, this is now possible as well, Uganda too. The trend is expected to spread through sub-Saharan Afrika given the continuous wars between banks attempting to become telecommunication companies in desperate attempts to avert them from cannibalizing on their banking canvas.
2. Regulatory Role vs. Tighter Regulatory Oversight
The governments of Tanzania and Nigeria have been tight on the telecommunications industry. For Tanzania in particular, the leading companies are required to list on the capital markets as a way of enforcing transparency and citizen participation in the much lucrative industry. So far, the largest telecommunications companies, Vodacom had a $210m IPO and Tigo is said to be in advanced stages of working out the punishing modalities that come with listing on the bourse.
It’s important to note that Airtel India does not seem to be particularly doing much to list on the Dar-es-Salaam Stock Exchange (DSE).
The heated up engagement between MTN Nigeria and the Nigerian government saw a reduction in the fine the big yellow was forced to pay because of violating laws and allowing unregistered SIM cards to be used on its network. Part of the conditions was that MTN lists on the Nigerian capital market as an enforcement of governance and transparency and citizen participation. Nigeria singlehandedly contributes more than 35% of MTN portfolio's revenue spread in 21 countries in Africa and the Middle East.
In Kenya, the run-ins between Safaricom and regulators are not about to come to an end. At least not in the foreseeable future. The recent service outage in the first half of the year paralyzed the country for close to 24 hours. It once again stoked desperate cries for the bifurcation of M-Pesa from Safaricom's monolith. It has been argued that when the service goes down, for whatever reasons, the nation is trapped in a rut-hole.
3. Cost Reduction Of Infrastructure
Domestically, just over ten years into the millennium, telecommunications companies came to a harsh realization that they were probably better off outsourcing management of their physical infrastructure to specialized equipment handling firms like Eaton Towers, American Towers among others. Previously, they were in charge of their entire value chain; from the communication masts, their maintenance, vending of mobile phones, selling of airtime, managing switchboards, customer relationship management and sundry.
The uberization of telecommunications infrastructure, to use startup parlance, has seen telecommunications companies delegate more and more of the menial work to do with laying fiber optic cables, setting out towers among others to third-party providers at lower costs than they would have typically incurred if they were in absolute control of all their operations.
We shall continue to see an upward increase in multi-stakeholder participation in the telecommunications industry. More developed countries are taking interest in developing and deploying infrastructure. The government of South Korea is invested in setting up and Information Access Centre for Uganda. Siemens is partnering with the governments of Uganda and South Sudan and that will see the commitment of resources to key infrastructure projects in health and transport. These will have a telecommunications element as part of their fabric.
Fair enough, the future looks even more bullish because of the renewed interest in Afrika by international technology giants like Facebook, Google and Microsoft. Facebook, through its Telecommunications Infrastructure Project (TAP), is pushing the innovation envelope around infrastructure such as network switches, Internet-beaming drones, satellites, and fiber optic cables.
Some of these are open source and widely available for telecommunications companies to deploy where they deem necessary. Google’s Internet balloons were recently hoisted in the heavens to serenade pockets of air and transmit much-needed packets of data.
4. Corporate Venture Capital Vehicles
Afrika's Telecommunications companies have certainly almost reached maturity. There is nothing much they can do to scale, save for increasing their subscriber numbers by pushing deeper and deeper to the last mile, which may not be as profitable a segment anyway.
They know that the arena for innovation is still relatively young, and they know that they are not a monopoly on innovation. That is why they are gobbling up startups that have potential to grow and leverage their existing infrastructure. Safaricom, in November 2016, launched a million dollar, Spark Venture Fund where it avails enormous resources to startups. The Fund has backed five startups to date; Farmdrive a data analytics startup, on-demand package delivery startup Sendy; mobile research tool mSurvey; e-learning startup Eneza Education; and informal sector employment app Lynk.
5. Acceleration And Incubation
Afrika's telecommunications companies have long been collaborating with technology and innovation hubs in the last five years or so. They have in conjunction organized hackathons and app awards that have yielded some sort of participation and collaboration with the tech community.
It should be noted that these events have sometimes been highways of dramatized platforms of trading invectives especially by the unsurprising startups’ accusations of telecommunications companies stealing their ideas and thereby implementing them without consent. At the beck and call of telecommunications companies, these partnerships are not about to flounder. In fact, they have moved into the space of starting their own startup incubators, tech hubs such as the Harper Hub in Kumasi by Vodafone and KNUST, an Orange telecom hub in Togo, and recently the planned Safaricom innovation center in Kenya.
6. Research Centres
These companies sit on gargantuan heaps of data, in a continent that is often referred to in the light of lack or absence of data. Data about mobile phone usage, call and mobile money logs, cell tower triangulation, among others has proved not only primordial in doing things like credit scoring for financial inclusion, to tracking crime, and in some cases epidemiological studies.
As data piles up, more statistical inferences will be possible. With that, telecommunications companies can play a critical role in providing evidence-based and contextual research.
7. Local Content
Many will not understand how long the local content problem has persisted in Afrika, it could be centuries old. Woe that it goes down the colonial tirade.
Indeed, local content was appropriated in the olden days by the colonialists all over the continent. Many were forced to learn their masters’ languages and ways of life. In return, there was a slow and steady erosion of their cultures. However, things have changed with more consciousness and more awareness.
There has not been as much demand for local content as it is today, and as telcos fully decentralize, and users, they will be positioned as platforms for aggregation of data and content. This will be the future.